Know the meaning of **rate of interest** in simple interest (S.I) or in compound interest (C.I). This is one of the important terms we should understand in S.I or C.I.

The basic or general meaning of **rate of interest** is said as “at what rate the interest is calculated” for a particular time. Now we will know the definition of rate and also we will understand this with the help of an example. Do you know simple interest and compound interest are very important concepts in school level and also in banking exams.

**Definition of the rate of interest:**

The extra amount that one has to pay/received for every Rs. 100 for the money he has borrowed/lent is called the **rate of interest**. Rate is represented with the letter “R “.

Important note:

The Rate will be always in terms of percentages only.

Example:

Let us think that sudheer borrowed Rs. 5000 from Ravi at the **rate of interest** of 5%. As the rate is 5%, sudheer has to pay an extra Rs. 5 for every Rs. 100. So now sudheer totally pays Rs. 250 extra money to Ravi.

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